PEARL Properties Ltd (Pearl) is concluding five-year negotiations for a US$50 million joint bus interchange project with the Harare City Council (HCC), a compay offical said.
Pearl MD, Francis Nyambiri, told shareholders at the company’s annual general meeting (AGM) this week HCC had finally approved the multi-million dollar project since proposals took off in 2008.
Without disclosing finer details of the approved agreement, Nyambiri said the two partners would generate significant revenues and profits from the project.
“The project is a bus interchange facility which will see us taking over the fourth street rank together with HCC,” Nyambiri told businessdigest on the sidelines of the AGM. “We want to develop the rank into a modern facility that has room for regional buses and retail space.”
Pearl’s Kamfinsa cluster housing project is now expected to be completed by the end of July after the company finished building a model house which is currently being showcased. The group wants to build eight units by the end of July.
In a trading update for the first four months of the year to April, Nyambiri said revenue was 0,53% above budget while property expenses increased by 27%.
He said actual revenue stood at US$3,03 million compared to the budgeted US$3,02 million.
“The property expenses reflect the company’s desire to invest in property with provision for doubtful debt,” Nyambiri added.
Net property income for the period was 3,13% below budget at US$2,57 million after adminstration expenses of US$1,37 million. The administration expenses were slightly below the budgeted US$1,4 million.
Operating profit for the period was 9,7% ahead of budget at US$1,5 million compared to the budgeted US$1,4 million, he said.
Nyambiri said the company’s financial position remained largely unchanged in the period under review with investment property amounting to US$120,4 million, and 8,9% above US$110,5 million in the same period in 2012.
The rental yield for the period was 4,5% above budget at 7,9% during the first four months of 2013, while the property cost to revenue ratio was 25,7% below budget at 15,1%.
Nyambiri said the total cost to revenue ratio was 58% compared to the budgeted 60%.
Pearl’s occupancies are underperforming at 78,87% against the budgeted 83,26%.
“We still have problems and all effort is being put to improve occupancy. Key among these being improving the quality of the product and property expenses will increase as we go,” Nyambiri said.
“We are not comfortable right now because we would want to be at 90% in terms of occupancy.”
Earlier this year, Pearl launched a real estate company, Oyster Real Estate, in order to diversify income streams and utilise existing skilled human capital.
The move would, according to management, help manage costs by improving the revenue per employee.
In the year to December 2012, Pearl’s rental income rose 9,4% from the previous financial year from US$8 million in 2011 to US$8,8 million. At the time, Nyambiri said, rental growth ranged from 0 to 10% as rental negotiations were difficult.
Rental yield for the year, as a result, was down from 12,2 to 8,6%. Rentals per square metre were up 11,6% to US$8,18, while expenses/rental income were at 18,4%.
Occupancy levels were at 78,9%, an improvement of 1,8%.
Last year the group had acquired an additional 20 000 square metres of retail suburban space and 30 000 square metres for a new office park.